H.P.G. Pennings (Enrico)http://repub.eur.nl/ppl/5681/
List of Publicationsenhttp://repub.eur.nl/eur_signature.pnghttp://repub.eur.nl/
RePub, Erasmus University RepositoryElectricity Futures Priceshttp://repub.eur.nl/pub/77123/
Wed, 01 Jan 2014 00:00:01 GMT<div>S-E. Fleten</div><div>R. Huisman</div><div>M. Kilic</div><div>H.P.G. Pennings</div><div>S. Westgaard</div>
This paper provides insight in the time-varying relation between electricity futures prices and fundamentals in the form of prices of contracts for fossil fuels. As supply curves are not constant and different producers have different marginal costs of production, we argue that the relation between electricity futures prices and futures prices of underlying fundamentals such as natural gas, coal and emission rights are not constant and vary over time. We test this view by applying a model that linearly relates electricity futures prices to the marginal costs of production and calculate the log-likelihood of different time-varying and constant specifications of the coefficients. To do so, we formulate the model in state-space form and apply the Kalman Filter to observe the dynamics of the coefficients. We analyse historical prices of futures contracts with different delivery periods (calendar year and seasons, peak and off-peak) from Germany and the U.K. The results indicate that analysts should choose a time-varying specification to relate the futures price of power to prices of underlying fundamentals.Defensive Disclosure of Patentable Inventions Under Antitrust Enforcementhttp://repub.eur.nl/pub/76930/
Fri, 18 Oct 2013 00:00:01 GMT<div>A. Bhaskarabhatla</div><div>H.P.G. Pennings</div>
We formulate a simple model of optimal defensive disclosure by a dominant firm facing uncertain antitrust enforcement and test its implications using unique data on defensive disclosures and patents by IBM. Our results indicate that stronger antitrust enforcement leads to more defensive disclosure and that defensive disclosure served as an alternative, but less successful, mechanism to patenting at IBM in appropriating returns from R&D. We extend our analysis to two other exceptionally large firms with defensive-disclosure activity, AT&T and Xerox, and show that their patenting propensity declined under increased antitrust enforcement relative to other firms in the industry. We further extend the case study of Xerox and using a differences-in-differences approach we show that patent propensity declined and patent scope increased in patent classes affected by the 1975 consent decree. Overall, we show how these firms used defensive disclosure as a strategy to balance the benefits of patenting with the costs of uncertain antitrust enforcement.Trademark or patent? The effects of market structure, customer type and venture capital financing on start-ups' IP decisionshttp://repub.eur.nl/pub/39515/
Tue, 09 Apr 2013 00:00:01 GMT<div>A.G.B. de Vries</div><div>H.P.G. Pennings</div><div>J.H. Block</div>
We analyze the initial intellectual property (IP) right of 4,703 start-up entrants in the US, distinguishing between trademark and patent applications. The results show that start-ups are more likely to file for a trademark instead of a patent when entering into more competitive market structures. Further, we find that start-ups with a focus on distribution that serves end-consumers are more likely to file for a trademark and that start-ups that operate upstream and sell to other businesses are more likely to file for a patent. Lastly, the external influences on a start-up‟s management, such as the involvement of a venture capitalist (VC), affect IP applications. The increased incentive of VC-backed start-ups to become operational on the market makes them more likely to file initial IP in the form of a trademark rather than a patent. Among other factors, we control for R&D and advertising intensity in the industry and distinguish between more technical and more service-driven industries.Defensive Disclosure under Antitrust Enforcement
http://repub.eur.nl/pub/31775/
Tue, 07 Feb 2012 00:00:01 GMT<div>A. Bhaskarabhatla</div><div>H.P.G. Pennings</div>
We formulate a simple model of optimal defensive disclosure by a monopolist facing uncertain antitrust enforcement and test its implications using unique data on defensive disclosures and patents by IBM during 1955-1989. Our results indicate that stronger antitrust enforcement leads to more defensive disclosure, that quality inventions are disclosed defensively, and that defensive disclosure served as an alternative but less successful mechanism to patenting at IBM in appropriating returns from R&D.
A conceptual overview of What We Know About Social Entrepreneurshiphttp://repub.eur.nl/pub/38346/
Sun, 01 Jan 2012 00:00:01 GMT<div>B. Hoogendoorn</div><div>H.P.G. Pennings</div><div>A.R. Thurik</div>
“The idea of ‘social entrepreneurship’ has struck a responsive chord,” wrote Dees (1998, p. 1). One may conclude that in the 10 years since Dees’ statement, the “responsive chord” has only become more responsive, given the growing attention from media, support organizations, policymakers, and targeted university research centers and teaching programs. Where entrepreneurship is widely acknowledged for bringing growth and economic wealth to society, social entrepreneurship is assumed to play the same role in creating social wealth in times where pressing social and ecological needs are abundant.Buy smart, time smart: Are takeovers driven by growth opportunities or mispricing?http://repub.eur.nl/pub/76357/
Thu, 01 Dec 2011 00:00:01 GMT<div>S. van Bekkum</div><div>J.T.J. Smit</div><div>H.P.G. Pennings</div>
Excessively high pricing by bidders and targets can be explained by new growth opportunities created by the merger or by irrational overpricing in financial markets. We integrate both explanations through a new decomposition of firm value and investigate whether it is "true" growth value or mispricing that drives takeover waves. We find that "bidders buy smart." Bidders primarily have high market values because of growth opportunities and overpricing, and select targets that are less overpriced with similar fundamental growth value. Bidders also seem to "time smart." Takeover activity increases when bidders are more overpriced, in order to cushion against price corrections.Evaluating pharmaceutical R&D under technical and economic uncertaintyhttp://repub.eur.nl/pub/23457/
Fri, 01 Jul 2011 00:00:01 GMT<div>H.P.G. Pennings</div><div>L. Sereno</div>
This study sets up a compound option approach for evaluating pharmaceutical R&D investment projects in the presence of technical and economic uncertainties. Technical uncertainty is modeled as a Poisson jump that allows for failure and thus abandonment of the drug development. Economic uncertainty is modeled as a standard diffusion process which incorporates both up-and downward shocks. Practical application of this method is emphasized through a case analysis. We show that both uncertainties have a positive impact on the R&D option value. Moreover, from the sensitivity analysis, we find that the sensitivity of the option with respect to economic uncertainty and market introduction cost decreases when technical uncertainty increases.Unionization structure, licensing and innovationhttp://repub.eur.nl/pub/20586/
Tue, 01 Mar 2011 00:00:01 GMT<div>A. Mukherjee</div><div>H.P.G. Pennings</div>
We show the effects of the unionization structure (viz., decentralized and centralized unions) on a firm's incentive for technology licensing and innovation. The incentive for technology licensing is stronger under decentralized unions. We identify circumstances under which the benefit from licensing creates a stronger incentive for innovation under decentralized unions. If the union's preference for employment is high, the benefit from licensing may create higher incentive for innovation under decentralized unions. However, if the union's preference for wage is high enough, the incentive for innovation is higher under a centralized union irrespective of licensing ex-post innovation. If the centralized union decides whether or not to supply workers to all firms, the possibility of higher innovation under decentralized unions increases. We further show that perfectly substitutable workers can be better off under decentralized unions if the labor productivity depends on the unionization structure, which occurs in our analysis when, e.g., licensing after innovation occurs only under decentralized unions or innovation (with no licensing) occurs only under a centralized union.Does Contract Complexity Limit Opportunities? Vertical Organization and Flexibilityhttp://repub.eur.nl/pub/20457/
Fri, 17 Sep 2010 00:00:01 GMT<div>H.P.G. Pennings</div>
The vertical organization of production entails a range of make-or-buy decisions of intermediate goods that are influenced by the difficulty of writing contracts with a potential supplier. When contracting causes high transaction costs, a firm can decide to vertically integrate the production of the intermediate product. Contract complexity can be measured by decomposing the range of inputs into inputs that are traded on an exchange (low contract complexity), inputs for which reference prices exist (low to medium contract complexity) and other, often relationship-specific inputs (medium to high contract complexity). This inaugural lecture addresses the impact of contract complexity on the growth opportunities of a firm. The present value of growth opportunities are embedded in the market value of a firm, which is a multiple of the firm’ stock price.
Examining the relation between the growth opportunities as part of the market value and contract complexity, we find that contract complexity has a negative impact on the growth opportunities of a firm if vertical integration is difficult. Whereas, on average, growth opportunities account for 56% of the market value of a firm, this percentage ranges between 50% and 53% for firms in sectors where contracts are complex and vertical integration is difficult. The difference represents a current market value between € 12 bn. and € 24 bn. only taking into account Dutch listed firms.Learning dynamics in research allianceshttp://repub.eur.nl/pub/62754/
Thu, 01 Jul 2010 00:00:01 GMT<div>T. Duso</div><div>H.P.G. Pennings</div><div>J.W. Seldeslachts</div>
The aim of this paper is to empirically test the determinants of Research Joint Ventures' (RJVs) group dynamics. We develop a model based on learning and transaction cost theories, which represent the benefits and costs of RJV participation, respectively. According to our framework, firms at each period in time weigh the benefits against the costs of being an RJV member. RJV dynamics can then be interpreted as a consequence of this evolving trade-off over time. We look at entry, turbulence and exit in RJVs that have been set up under the US National Cooperative Research Act, which allows for certain antitrust exemptions in order to stimulate firms to co-operate in R&D. Accounting for unobserved project characteristics and controlling for inter-RJV interactions and industry effects, the Tobit panel regressions show the importance of group and time features for an RJVs evolution. We further identify an average RJVs long-term equilibrium size and assess its determining factors. Ours is a first attempt to produce robust stylized facts about co-operational short- and long-term dynamics, a neglected dimension in research co-operations, but an important element in understanding how collaborative learning works.What do We Know about Social Entrepreneurship: An Analysis of Empirical Researchhttp://repub.eur.nl/pub/16558/
Tue, 01 Jun 2010 00:00:01 GMT<div>B. Hoogendoorn</div><div>H.P.G. Pennings</div><div>A.R. Thurik</div>
Despite the growing attention to social entrepreneurship as a scholarly field of research, it is still in a stage of infancy. Research in the past two decades has been primarily dedicated to establishing a conceptual foundation, which has resulted in a considerable stream of conceptual papers. Empirical articles have gradually appeared since the turn of the century. Although they are still outnumbered by conceptual articles, empirical articles are of considerable significance for the evolution of social entrepreneurship as a field of scientific inquiry. The purpose of this paper is to gauge the current state of empirical research in the field by reviewing 31 empirical research studies on social entrepreneurship, classifying them along four dimensions and summarising research findings for each of these dimensions. To serve this purpose in a meaningful fashion requires discriminating between different perspectives on social entrepreneurship. Hence, four different schools of thought are presented, and the articles in our sample are classified accordingly.A Model for Evaluating Pharmaceutical R&D Investment Projects under Technical and Economic Uncertaintieshttp://repub.eur.nl/pub/18211/
Thu, 18 Feb 2010 00:00:01 GMT<div>H.P.G. Pennings</div><div>L. Sereno</div>
This study sets up a compound option approach for evaluating pharmaceutical R&D investment projects in the presence of technical and economic uncertainties. Technical uncertainty is modeled as a Poisson jump that allows for failure and thus abandonment of the drug development. Economic uncertainty is modeled as a standard di¤usion process which incorporates both up-and downward shocks. Practical application of this method is emphasized through a case analysis. We show that both uncertainties have a positive impact on the R&D option value. Moreover, from the sensitivity analysis, we nd that the sensitivity of the option with respect to economic uncertainty and market introduction cost decreases when technical uncertainty increases.What Do We Know About Social Entrepreneurship? An Analysis of Empirical Researchhttp://repub.eur.nl/pub/23448/
Fri, 01 Jan 2010 00:00:01 GMT<div>B. Hoogendoorn</div><div>H.P.G. Pennings</div><div>A.R. Thurik</div>
Despite the growing attention to social entrepreneurship as a scholarly field of research, it is still in a stage of infancy. Research in the past two decades has been primarily dedicated to establishing a conceptual foundation, which has resulted in a considerable stream of conceptual papers. Empirical articles have gradually appeared since the turn of the century. Although they are still outnumbered by conceptual articles, empirical articles are of considerable significance for the evolution of social entrepreneurship as a field of scientific inquiry. The purpose of this paper is to gauge the current state of empirical research by reviewing 31 empirical research studies on social entrepreneurship, classifying them along four dimensions and summarising research findings for each of these dimensions. To serve this purpose in a meaningful fashion requires discriminating between different perspectives on social entrepreneurship. Hence, a conceptual overview with four different schools of thought is presented, and the articles in our sample are analysed accordingly.A Real Options Perspective On R&D Portfolio Diversificationhttp://repub.eur.nl/pub/17436/
Tue, 01 Sep 2009 00:00:01 GMT<div>S. van Bekkum</div><div>H.P.G. Pennings</div><div>J.T.J. Smit</div>
This paper shows that the conditionality of investment decisions in R&D has a critical impact on portfolio risk, and implies that traditional diversification strategies should be reevaluated when a portfolio is constructed. Real option theory argues that research projects have conditional or option-like risk and
return properties, and are different from unconditional projects. Although the risk of a portfolio always depends on the correlation between projects, a portfolio of conditional R&D projects with real option characteristics has a fundamentally different risk than a portfolio of unconditional projects. When conditional R&D projects are negatively correlated, diversification only slightly reduces portfolio risk. When
projects are positively correlated, however, diversification proves more effective than conventional tools predict.Domestic plant productivity and incremental spillovers from foreign direct investmenthttp://repub.eur.nl/pub/17546/
Tue, 01 Sep 2009 00:00:01 GMT<div>C. Altomonte</div><div>H.P.G. Pennings</div>
We develop a simple test to assess whether horizontal spillover effects from multinational to domestic firms are endogenous to the market structure generated by the incremental entry of the same multinationals. In particular, we analyze the performance of a panel of 10,650 firms operating in Romania in the period 1995-2001. Controlling for the simultaneity bias in productivity estimates through semi-parametric techniques, we find that changes in domestic firms' total factor productivity are positively related to the first foreign investment in a specific industry and region, but get significantly weaker and become negative as the number of multinationals that enter in the considered industry/region crosses a specific threshold. These changing marginal effects can explain the lack of horizontal spillovers arising in traditional model designs. We also find these effects to vary between manufacturing and services, suggesting as a possible explanation a strategic change in technology transfer decisions by multinational firms as the market structure evolves.A Real Options Perspective On R&D Portfolio Diversificationhttp://repub.eur.nl/pub/15410/
Fri, 03 Apr 2009 00:00:01 GMT<div>S. van Bekkum</div><div>H.P.G. Pennings</div><div>J.T.J. Smit</div>
This paper shows that the conditionality of investment decisions in R&D has a critical impact on portfolio risk, and implies that traditional diversification strategies should be reevaluated when a portfolio is constructed. Real option theory argues that research projects have conditional or option-like risk and return properties, and are different from unconditional projects. Although the risk of a portfolio always depends on the correlation between projects, a portfolio of conditional R&D projects with real option characteristics has a fundamentally different risk than a portfolio of unconditional projects. When conditional R&D projects are negatively correlated, diversification only slightly reduces portfolio risk. When projects are positively correlated, however, diversification proves more effective than conventional tools predict.Domestic Plant Productivity and Incremental Spillovers from Foreign Direct Investmenthttp://repub.eur.nl/pub/15143/
Tue, 10 Mar 2009 00:00:01 GMT<div>C. Altomonte</div><div>H.P.G. Pennings</div>
We develop a simple test to assess whether horizontal spillover effects from multinational to domestic firms are endogenous to the market structure generated by the incremental entry of the same multinationals. In particular, we analyze the performance of a panel of 10,650 firms operating in Romania in the period 1995-2001. Controlling for the simultaneity bias in productivity estimates through semi-parametric techniques, we find that changes in domestic firms’ TFP are positively related to the first foreign investment in a specific industry and region, but get significantly weaker and become negative as the number of multinationals that enter in the considered industry/region crosses a specific threshold. These changing marginal effects can explain the lack of horizontal spillovers arising in traditional model designs. We also find these effects to vary between manufacturing and service, suggesting as a possible explanation a strategic change in technology transfer decisions by multinational firms as the market structure evolves.Horizontal Multinational Firms, Vertical Multinational Firms and Domestic Investmenthttp://repub.eur.nl/pub/14741/
Wed, 14 Jan 2009 00:00:01 GMT<div>J. Emami Namini</div><div>H.P.G. Pennings</div>
We build a dynamic general equilibrium model with 2 countries, horizontal and vertical multinational activity and endogenous domestic and foreign investment. It is found that horizontal multinational activity always leads to a complementary relationship between domestic and foreign investment. Vertical multinational activity, in contrast, leads to either a substitutional or complementary relationship between domestic and foreign investment, depending on the firms' technologies. We test the theoretical implications with a panel of U.S. multinationals and find empirical support.Learning from foreign investment by rival firms: Theory and evidencehttp://repub.eur.nl/pub/13557/
Mon, 01 Sep 2008 00:00:01 GMT<div>C. Altomonte</div><div>H.P.G. Pennings</div>
We offer an alternative explanation for follow-the-leader behavior in foreign investment decisions based on Bayesian learning by rival firms. We test the implications of the model through a panel count data sample of MNEs that have invested in Central and Eastern Europe over the period 1990–1997. Interacting the measure of rivals' investment in country-industry pairs with uncertainty, we are able to identify the channel of Bayesian learning about revenue postulated by the model as the only one consistently generating the detected follow-the-leader behavior of foreign investments. The empirical findings are robust with respect to different model specifications.Privatization of real optionshttp://repub.eur.nl/pub/15207/
Mon, 01 Sep 2008 00:00:01 GMT<div>H.P.G. Pennings</div>
Many privatization objects have characteristics of real options in the sense that a substantial investment is required in order to make the asset productive while at the same time there is uncertainty about the future value of the asset. This paper explores several auction designs for the privatization of such assets and shows how government revenues depend on the auction designs. As a benchmark, the paper analyzes revenues from an auction with cash only. It is demonstrated that a bid that includes a bidding firm's pledged investments at the time of investment as to stimulate regional development is inferior to a cash only bid. Investments which are made compulsory by the government at the time of the actual investment or retained shareholding by the government, both announced before the auction, can augment the government's payoff. Journal of Comparative Economics 36 (3) (2008) 489-497.